Debt crisis: as it happened - November 2, 2011

We believe in the benefits for growth, lowering our burden of debt, a strong
package of support for the next few years. We can put our house in order and
make a viable economy. But this comes with responsibilities. It is Important
that the Greek people make a decision on important developments. It is our
democratic right and Greek people, I believe, are mature and wise enough to
make the decision. We're very proud to be part of the eurozone. It is
crucial we show the world we can live up to our obligations. It is crucial
to our future in eurozone. The referendum could be held on December 4. I am
returning to Greece to consult with the leaders of other parties to inform
them of the discussions we have had. I informed Mr Sarkozy and Ms Merkel
that we need to have wide consensus because this programme is difficult to
implement. The essence is not only of the bail-out programme but whether we
want to be in eurozone. But the Greek people want us to be in eurozone.

But Friday's confidence vote is our first battle. I hope we will win.

I want the Greek people to speak and they will speak soon.

23.05 Meanwhile, Sarkozy accepted that there will be a bail-out
according to certain rules.

It is not up to us to tell Greece what to do. We are not asking for anything
other than Greece obeys the rules. It is up to them whether they accept the
rules or not. There is not enough leadership [in the eurozone]. This is not
a pleasant situation to be in but this is where we are.

23.03 The press conference by Merkel and Sarkozy has just
ended. Strong words from both leaders. They have said that the EU is more
important than Greece. This from Merkel:

With Europe we have the admiration of whole world. The eurozone needs
coordinated and agreed response to take forward the agreement of last week.
The psychological situation has changed due to Greece's referendum. The
Greeks decided to hold this referendum without warning. But we will not
abandon principles of democracy. We cannot put at stake the great work of
unification of the euro.

22.14 Meanwhile, Russia is on the verge of ending its 18-year
wait to get into the World Trade Organisation after accepting a
Swiss-mediated deal that removed reservations by its arch-foe Georgia.

22.12 The euro meeting has just ended.

22.02 We are hearing reports that Italy's government has given
the go-ahead to a package of economic reforms aimed at easing
pressure from markets worried about contagion from Europe's debt crisis.

21.37 Nicolas Sarkozy and Angela Merkel are to make a joint
statement tonight after their meeting with Greek PM George Papandreou.

21.15 The G20 leaders are now sealed away in their talks, which are
likely to carry on until late tonight/early this morning.

20.55 Further quotes from Guangyao are coming in which are
slightly more positive. Still, it's clear that there's little hope of
Chinese investment unless Europe can come together and provide some concrete
plans.

Whether or not you should be optimistic about the possibility of China coming
to the rescue depends on your faith that European leaders can collaborate to
create a firm and effective plan to bail-out its troubled states...

The EFSF is part of China's investment of its foreign exchange reserves. The
fund has not established details of its investment options so we still can't
talk about the issue of investing.

We have confidence in Europe. We hope the European Union and the euro zone
will implement these crucial plans to stabilise financial markets and foster
economic growth.

Currently there are no technical details yet on these two new [EFSF]
mechanisms, so there is no question of talking about investment.

20.32 Zhu Guangyao, China's deputy finance minister, has said that
China can't consider putting more cash into the EFSF bail-out fund as the
plan to leverage its €440 billion to €1 trillion is too vague - certainly
not the first time this has been suggested since the Grand Plan was
unveiled.

This comes just minutes after the director of the international department at
the Chinese central bank - who is also in Cannes - said that China will see
Europe as a key investment area for the foreseeable future. Confusion reigns
in Cannes this evening.

20.17 IMF chief Christine Lagarde says she has "never seen
as much determination and decisiveness to act in a coordinated fashion"
as the eurozone leaders are currently showing. Presumably that desire for
coordination is coming from countries other than Greece.

Of course there are hiccups on the road, sometimes major hiccups, but what
matters is what has been agreed on Oct. 26 ... and the resilience and the
determination of the European partners.

20.15 China is becoming an increasingly important part of this eurozone
story.

Tonight Sarkozy is talking to Chinese President Hu Jintao, in
the hope that he will use some of his €2.3 trillion in foreign exchange
reserves to ease problems here in Europe.

Zhang Tao, director of the international department at the Chinese
central bank, is also in Cannes, and said that China will see Europe as a
key investment area for the foreseeable future.

20.05 The bell has rung at the New York Stock Exchange, ending
the day's trading on the US markets.

Ben Bernanke's announcement passed without much reaction from US
markets initially, but small hints that QE3 could be on the way in the
future eventually nudged stocks upwards.

The Dow Jones closed up 1.53pc, the S&P 500 rose 1.61pc and
the Nasdaq climbed 1.27pc.

19.47 Papandreou has just arrived at the G20 Summit. He didn't look
nervous. Incidentally, the summit is being held in the Palais des Festivals
et des Congrès, where the Cannes Film Festival takes place.

19.44 Sarkozy will be meeting Chinese President Hu Jintao
tonight. Alistair Darling said earlier on that China wouldn't come to
the rescue, but Paul Irwin-Crookes, from the China Centre at Oxford
University, believes otherwise:

It's important to know that China will want to understand more about what the
agreement involves. Europe is a very important trading partner, the most
important trading partner, for China.

As a result it's just as interested in ensuring that Europe continues to be
stable. There are obvious aspects where China's interests are wrapped up
with Europe's future prospects. There are some very good motivations.

19.18Alistair Darling, former chancellor, is speaking live on Sky
News now. He says the eurozone has "blown" its chance to
present a detailed plan, which would have prevented the Greek referendum
call. He also said that China would not come to the rescue of Europe.

We've now got a major economic crisis which has every risk of spilling back
into the banking system. It is very, very serious and they need to get a
grip on it.

I don't think Greece has got a hope in hell of actually achieving this.
Until we've got a sensible plan to get growth going on, these problems are
just going to keep going on and on. If you don't get growth you get higher
borrowing and higher debt.

19.10 A quick flash back to London now, where the St Paul's protesters
have reportedly been offered a chance to stay put until January. We'll bring
you more as we have it, but John Cooper QC, who represents the
protesters, tweets this:

19.05 Eurozone chairman Jean-Claude Juncker is at the Cannes
meeting, and he is not happy with Greece's decision to stop the bail-out
process to give the public have a chance to vote. He said: "We took a
decision last week as 17 (member states), we can't allow anyone to
disassociate himself from that decision."

But a pragmatic French official, also at the summit, said there was little
chance of stopping them. The best they could hope for was to get the vote
out of the way quickly.

It is too late to persuade them to go back on the decision to hold a
referendum. The idea is that they hold the referendum as quickly as possible
and make it about being in the euro.

19.00 Meanwhile, back in Europe, tensions are running high...

A European Union official has given an interview to a small group of reporters
in Cannes, appearing "angry and frustrated", according to
the Wall Street Journal. The anonymous official said:

I have no words to describe how I feel about Greece. Uncertainty is exactly
what we don't need right now.

If Greece were going to war tomorrow, they would establish national unity.
Well, we are at war. The crisis is that bad. And it's time that Greece put
party politics aside and demonstrate national unity.

Greece as a country has to make it clear that they want to make the kind of
effort that is necessary. If not, they have to bear the consequences.

18.46 Bernanke has claimed that without the support of monetary policy,
the US economy would be in "a much deeper ditch".

The severity of the financial crisis was more severe than believed, in
retrospect, he admitted.

18.38 Bernanke has been asked if it is true that MF Global's
leveraging ratio was 40:1, and whether the Fed thought that appropriate. He
replied that the company was approved as a primary dealer in February, and
that at the time it matched the criteria. It was described as an "idiosyncratic"
bankruptcy.

We have set those standards to allow smaller firms like MF Global to
participate.

We are not the regulators... we do not have ongoing insights into
developments with the company. Making them a primary dealer did not
constitute a seal of approval.

We stopped trading with them before they failed and we suffered no losses.

18.26 Here are some of Bernanke's responses so far:

Our job is to do the best job for the US economy. Therefore we're going to
make our decisions based on what's good for the economy and we're not going
to take politics into account. The area we've fallen short is on the
employment side.

The Fed's mandate is a dual mandate. We have a mandate for employment and
price stability. We talked yesterday about nominal GDP as an indicator...
and it was a very interesting discussion. We are not contemplating any
radical change in framework, we're going to stay with the dual mandate
approach we've been using.

I certainly understand that many people are disatisfied with the state of
the economy, I'm disatisfied with the state of the economy. Unemployment is
far too high.

18.25 He's now taking questions...

18.22 Ben Bernanke has just walked in... Here are some of his early key
points:

• Pace of progress expected to be "frustratingly slow"• "We will continue to monitor European developments closely"• Disruption from Japanese earthquake has diminished • Inflation will settle at or below mandated level of 2pc

18.09 The Federal Reserve is due to hold a press conference any minute
now. Stay tuned.

17.53 Some more mood music for you, courtesy of Italian PM Silvio
Berlusconi (see 15.50). Mr Berlusconi is due to hold an
emergency cabinet meeting to implement reforms promised ahead of the
Brussels summit last week.

17.31 In simple terms: it's a 'no' to more Greek aid unless there is a
'yes' to the bail-out plan and all the painful austerity measures associated
with it.

This tweet from Reuters Breakingviews columnist Peter Thal Larsen
doesn't help to set the mood:

17.28 Another IMF source told Reuters:

The board would not want to give money to Greece and then wonder what will
happen [...] The board will want comfort that Greece will fulfil its
commitments and right now Papandreou is unable to give that.

The sooner Greece holds the referendum, the sooner the sixth tranche will
be paid. But right now, it isn't going to be paid.

17.22 This from Bruno Waterfield, in Brussels:

17.05 Meanwhile, Europe's markets have closed. The FTSE 100 in
London closed up 1.15pc at 5,484.10, while the CAC 40 in Paris
finished up 1.4pc and the DAX 30 in Frankfurt rose almost 2.3pc.

Angus Campbell at Capital Spreads, said:

So often in the past we’ve seen markets rally ahead of important summits or
meetings, which is exactly what we’ve seen today on the eve the G20. Today
is a classic example of optimistic buying ahead of a major meeting of global
leaders in the hope that they can brush the Greek referendum plans aside as
merely a blip.

16.55 US markets have hardly batted an eyelid at the news, and are
holding onto their early gains.

Joshua Brown at Fusion Analytics, said:

There's not much red meat in the statement. We're going to be more interested
in how the press conference goes to see if he gets asked about GDP
targeting. There doesn't appear to be much in the statement that's different
than the expectation.

The Committee continues to expect a moderate pace of economic growth over
coming quarters and consequently anticipates that the unemployment rate will
decline only gradually toward levels that the Committee judges to be
consistent with its dual mandate. Moreover, there are significant downside
risks to the economic outlook, including strains in global financial markets.

16.33BREAKING There is no further QE from the US Federal
Reserve, but it will continue with Operation Twist - its scheme
to sell short-term securities holdings and buy long ones to try and drive
down interest rates on mortgages and loans.

There is a hint, though, that the Fed could bring more QE in the future,
saying that it was "prepared to employ its tools to promote a stronger
economic recovery".

16.28 The vote will take place on Friday, and will be concluded
by midnight.

16.23 The Greek parliament have begun their debate on the
confidence motion billed for Friday.

15.50 Who says Mr Berlusconi doesn't know how to empathise with
his people? The Italian prime minister has reportedlyput
his latest album on hold out of respect for the current crisis
engulfing Italy.

Nick Squires in Rome reports:

Mr Berlusconi had been expected to release an album of 11 songs, titled
'True Love', in September.

The songs were written by the 75-year-old billionaire and sung by Mariano
Apicella, a Naples-based singer who has become the prime minister's de facto
personal minstrel.

They have collaborated on a number of albums in the past – this is their
fifth CD.

But Mr Berlusconi appears to have judged it inappropriate to release the
album of sentimental ballads at a time when millions of hard-pressed
Italians are feeling anything but sentimental towards him.

Mr Apicella [left] said: The premier is an expert in Neapolitan music and
a talented songwriter.

15.47 There's pressure on eurozone leaders from all sides to fix the
debt crisis, and now even his Holiness has thrown
his hat into the ring. Pope Benedict XVI called on G20
leaders to promote "humane and integral development":

It is my hope that the meeting might help to overcome the difficulties
that, on a global level, are blocking the promotion of an integral and
authentically human development.

15.25 Italy has called an emergency cabinet meeting for later today.
The reason? To implement economic reforms ahead of the G20 summit.
The man under pressure? Silvio Berlusconi.

Parliament will convene this evening to adopt "the most urgent measures,"
according to transport minister Altero Matteoli, quoted by ANSA news
agency in Italy.

15.11 Willem Buiter, chief economist at Citigroup, Goldman Sachs' Jim
O'Neill and Katinka Barysch, deputy director of the Centre for
European Reform in London are talking to Stephanie
Flanders on Radio 4.

Mr Buiter poses an interesting question. Even if Greece votes 'yes' to
the bail-out - who's going to keep the country afloat in the mean time?

Even if it won, it's difficult to see if the IMF will disburse payment [for
its existing bail-out loan] in the mean time – and if the IMF doesn't
disburse then other countries will not want to disburse either. The worry is
that in December [when the next aid tranche is due] there will be a
disorderly default.

Ms Baryschadds that by calling for a referendum, Mr Papandreou
has:

kicked the can out of his own hands and into the people’s hands.

14.50 Francois Fillon, France's prime minister has also asked for
concrete decisions from Greece. He said he "regretted" the
country's decision to call for a referendum on the bail-out package, and
told parliament:

Of course ... in a democracy it's always legitimate to turn to the people but
we regret and I want to say this solemnly ... this unilateral announcement
on a problem that involves all of Greece's partners [...] The Greeks must
say quickly and without ambiguity if they want to keep their place in the
eurozone or not.

14.40 With the Greek PM dependent on getting through a vote of
confidence from the country's MPs on Friday, the BBC has put together
a handy chart of the composition of the parliament so you can see what Mr
Papandreou is up aganist. (He's the leader of the PASOK party).

14.26 Ambrose says that he is a Krugman fan but "he is
wrong about the specific case of Britain", which cannot be compared
with the US. The mix of spending cuts and loose monetary policy has worked
for us before. He writes:

Britain has won a reprieve because the Coalition has held rock solid and
stuck to its policies. Perhaps there might be some safe margin for loosening
now, but not much. [...]

Britain has rescued itself twice over the last century by a radical mix of
fiscal tightening on the one hand and monetary stimulus with devaluation on
the other.

We did it in 1931-1932 after liberation from the Gold Standard, and we did
it again in 1992-1993 after liberation for the Europe’s Exchange Rate
Mechanism (when Cameron had a ring-side seat as an aide to Chancellor Norman
Lamont).

He takes issue with a piece written by Nobel Prize-winning economist Paul
Krugman in the New York Times, called "Cameron's
Fantasy" in which he derides the PM's clams that Britain's
discipline in sticking to austerity plans has brought down borrowing costs
and avoided a debt crisis.

Paul Krugman won the Nobel Prize in Economics in 2008 (Photo: AP)

14.20 ...while Jose Manuel Barroso has brought out the violins,
warning that failure to support the latest bail-out deal would result in a
fate worse than...austerity.

I want to make a very urgent, heartfelt appeal for national and political
unity in Greece.

...the head of the European Commission told Reuters in a
statement. He added:

Without agreement of Greece to the programme supported by the EU and IMF,
conditions for Greek citizens will become much more painful, particularly
for the most vulnerable.

14.10 German Chancellor Angela Merkel has said has insisted on
less talk, more action at today's meeting of eurozone leaders. She told
reporters:

For us, it is actions that matter. We agreed a programme with Greece last
week. And from the EU side, at least for Germany, we want to implement this
programme. For this, we need clarity and that's what these talks tonight are
about.

14.04 Another chance to see Prime Minister David Cameron and
Labour leader Ed Miliband at Prime Minister's questions today:

13.45 US markets have opened higher. The Dow Jones Industrial Average
ticked up 1.3pc to 11,811.37, while the broader S&P 500 rose
1.5pc to 1,236.27.

13.25 Some timings for the meetings this afternoon, both London time:

16.30 - Merkel, Sarkozy emergency meeting in Cannes, along with Jean-Claude
Juncker, who chairs eurozone ministerial meetings, IMF chief Christine
Lagarde, top EU officials Herman Van Rompuy and Jose Manuel
Barroso, and an official from the European Central Bank.

19.30 Greek PM George Papandreou joins emergency meeting with the group
above.

13.10 BBC business editor Robert Peston has been speaking on BBC
News. His main concern?

Italy.

He points out that although stock markets have been jittery today:

...much more important is the impact of the price on Italian debt [...] a much
bigger economy with much bigger debts. There is a genuine risk that italy
could find burden of interest is too excessive [and] the stakes in terms of
the eurozone are incredibly high.

12.45 Telegraph reporters James Kirkup and Chris Hope are
outraged that there was no proper discusson of Greece at PMQs:

12.30 Something new to worry about - French bonds.

The gap between the amount of interest invetsors charge to hold German
government debt compared to French government debt is at its widest since
the euro was set up.

In layman's terms, that means investors see lending money to France as a
riskier bet than to Germany.

Yields on French government debt are 1.3 percentage points more interest than
Germany on debt due in 10 years - 3.1pc compared to Germany's 1.84pc.

Andrew Roberts, head of European rates strategy at Royal Bank of
Scotland Group, described French bonds as a "key short" meaning
investors should expect the price to fall and the yield to rise.

12.19 Alistair Darling, the former Chancellor, has waded in at PMQ's.

Heasks if Britain will press for details on how Greece will get itself
back on its feet at the Cannes G20 meeting that starts tomorrow.

David Cameron says that although he feels "some progress was made"
in Brussels last week, the need for decisive decisions and to "put the
meat on the bones of these plans" was "even greater".

12.10 The Prime Minister is getting a bit of flak on Twitter for the "global
storm" claim (12.08 post) - commentators are hearing echoes of
Gordon Brown.

From the Telegraph's James Kirkup:

12.08 It's a lively Prime Minister's Questions in the House of
Commonstoday, and even speaker John Bercow remarks "the
house is getting far too excited - it's only six minutes past".

Ed Miliband starts his questions by questioning yesterday's GDP figures
that showed the UK economy grew by 0.5pc - better than expected but viewed
as lacklustre by many economists.

David Cameron retorts that Mr Miliband "can't even bring
himself to welcome news like that!" He adds:

There is a global storm in the world economy today and it is in our
interest to help confront that global storm, but it is also in our interest
to keep our country safe.

11.55 Daniel Knowles, the Telegraph's assistant comment editor,
says Germany should consider
the lessons of its own past when it seeks to squeeze Greece until the
pips sqeak. He writes:

In 1923, French and Belgian soldiers marched over the border into the Ruhr,
part of the fragile new democracy of Germany. They took control of the coal
mines, iron foundries and steel mills and simply carried over the goods they
were owed as part of the Versailles reparations treaty.

In response, the Weimar Government was force to print money to pay its
workers.

I bring this up because, now, the situation is reversed. Today Germany is
the creditor.

Understandably, German voters are annoyed to be depicted as Nazis in Greek
newspapers while they work longer years, in harder jobs, for roughly the
same pay they were earning 10 years ago.

... But the Germans cannot invade Greece and take holidays on the islands
without paying. They cannot take over Crete and declare it a new German
state.

They have to accept that Greece cannot pay its debts, and that the only
alternative to Germany paying its debts for it is catastrophe. It does not
pay to be vindictive.

11.30 Following up on the 10.55 post, the Bank of Italy HAS now
come out and denied newspaper reports that it would set up a bond swap with
Italian banks to try and ease Italy's borrowing costs. So back to the
drawing board.

The Italian central bank said reports were "without foundation and
contrary to European rules".

11.15 Greece may not be the only place about to see a change of leader -
Silvio Berlusconi's popularity ratings among Italian's have fallen even
further.

Only 22pc of Italian's have "a lot" or "enough" confidence
in their prime minister, down from 24pc in September. By contrast, 66pc of
people have "zero" confidence in the 75-year old leader, according
to the poll for the newspaper La Repubblica.

11.05 While the EFSF delays, Portugal has just got its owngovernment
bond auction away, selling a total of €1.24bn (£1.07bn) in three-month
bills, but at a heavy price.

Average interest rates paid on the bonds rose to a euro-era high of 4.997pc,
up from 4.972 previously, though demand outstripped supply two-fold.

11.00 The delayed EFSF bond sale (see 10.00) has shaken
markets.

After early gains, the FTSE 100 is now trading down 0.3pc at 5405.73,
while the CAC 40 in Paris is only slightly up at 3,075.48 and
Frankfurt's DAX is trading 0.2pc higher.

Ben Critchley, sales trader at IG index, said:

Once again, dealers have been served up another dead-cat bounce as the
session gets established.

Asian markets may have found some support off the belief that perhaps
Greece couldn’t derail the bailout plans quite as easily, but there’s now
mounting pessimism in Europe ahead of the G20 meeting.

Add to this the fact that a number of the largest-cap companies in London
have gone ex-div today and that’s another 13 points off the FTSE, so the
fact that we’re finding ourselves back below 5400 can be of little surprise.

10.55 It's claim and counter-claim today - Italian newswires are now
reporting a denial from the Bank of Italy that they plan to set up an
emergency bond swap with Italy's banks (see 09.05 post) in order to
get banks to buy more government debt and ease funding pressures.

We'll keep our eyes peeled for a Bank of Italy statement.

10.50 Hmm, embarassing fat finger over at the AFP news agency - at 10.35
came the headline "European plan to save Greece is off the table:
German foreign minister" - which is fairly serious stuff.

But just 10 minutes later came the instruction "Kill" - the Greek
rescue deal is NOT off the table. For now anyway...

10.45 As per 09.40 tweet, ITV's Laura Kuenssberg is in
Cannes for the G20 and notes an unfotunate choice of venue for press
accreditation:

10.40 The power of the Greek army should not be underestimated. The
table below, courtesy of Marc Ostwald at Monument Securities, shows
that on a per capita basis, its army is larger than China, America and
even embattled Syria:

The development gave the impression that a Turkish-style military
conspiracy was suspected by the government, but no such rumours or
allegations had circulated in the country.

Greece has been free of political interventions by the military since the
overthrow of the military junta that ruled the country in the 1967-74
period.

Officers celebrate during the military junta that lasted between 1967 and
1974

10.15 For those of you who were worrying, the Greek finance minister, Evangelos
Venizelos, who was in hosptial with stomach pains yesterday when the
Greek government was about to collapse, is now back on his feet.

He's feeling so much better he will accompany PM George Papandreou when
he goes to meet Angela Merkel and Nicolas Sarkozy in Cannes
this afternoon.

The Greek pair should have plenty to catch up on en route - Mr Evangelos said
yesterday he hadn't even been told that the referendum would be announced.

10.10 More on the delay to the bond sale by the EFSF - from a lead
manager at one of the banks arranging the sale, courtesy of Reuters:

The EFSF has no immediate urgency to fund and felt that doing a deal today
might be rushing things, especially given recent market volatility.

Not sure that stock markets are buying this reason...

10.00 BREAKING The European Financial Stability Facility (EFSF) - also
known as the bail-out fund, has been forced to delay a bond sale to raise
€3bn (£2.58bn) that was due to take place today.

Bloomberg is reporting thatthe sale has been delayed because of market
conditions, citing people close to the deal.

As a result, European markets have now given up their gains first thing this
morning:

The FTSE 100 is down 0.6pc at 5,389 while the CAC is off 0.3pc
in Paris and the DAX fell 0.1pc.

09.55 Bruno Waterfield has an update from Brussels on what Nicolas
Sarkozy will be telling George Papandreou at their meeting with Chancellor
Merkel this afternoon. (He links to this
article from Le Monde if your French is up to it.)

@BrunoBrussels:
Sarkozy to tell Papandreou, no new talks and next EU-IMF payment will not be
paid until Greece says Yes

09.50 Away from the eurozone gloom, there's some good economic news for
the UK this morning,

Construction activity in Britain picked up in October to a five-month high as
firms took on new work and increased hiring rates.

The Markit/CIPS construction PMI index jumped to 53.9 in October,
against expectations for a dip to 50, and up from 50.1 in September.

Construction workers in London recreate the famous image first pictured
in the New York Herald Tribune - but with more safety equipment.

09.45 As well as the gloomy manufactuing figures from the eurozone (see 09.20
post), the unemployment rate in Germany has also risen for the first time in
almost two years.

Germany's Federal Labour Office said unemployment rose by 10,000
compared to an expected drop of 10,000, pushing the unemployment rate up to
7pc from 6.9pc in September.

Joerg Lueschow at WestLB, said:

Considering the conditions in the real economy - with a weaker economy in
the winter period and weakening global demand -- it's time to start getting
ready for the fact that the situation on the jobs market won't be able to
continue as it has. The development could then be stagnation.

09.40 ITV's business editor Laura Kuenssberg is on her way to
the G20 summit in Cannes, and flags up the absurdity of holding debt crisis
talks in the wealthy people's playground that is the South of France:

@ITVLauraK:
All the ads in Nice airport are for posh watches, speedboats and 'wealth
management' firms - incongruous much?!

I wish I could convey the sheer horror that his proposal provoked in
Brussels.

The first rule of the Eurocracy is “no referendums”. Brussels functionaries
believe that their work is too important to be subject to the prejudices of
hoi polloi (for once, the Greek phrase seems apposite).

Referendums are always seen as irresponsible; but, at a time when the euro
is teetering on the brink, Papandreou’s proposal was seen as an act of
ingratitude bordering on treason.

09.20 This table shows how the eurozone countries compare:

Country

October manufacturing PMI (final)

Context

Greece

40.5 (A reading above 50 indicates expansion)

31-month low

Italy

43.3

28-month low

Spain

43.9

2-month high

Netherlands

48.0

27-month low

Austria

48.0

27-month low

France

48.5

2-month high

Germany

49.1

27-month low

Ireland

50.1

5-month high

You know it's bad when Germany - the king of making things, isn't
making things.

Markit said Germany - one of the main drivers of the previous
recovery - saw its PMI indicate contraction for the first time since
September 2009. It added:

Rates of contraction accelerated sharply in Greece and Italy, with the
performance of Italy deteriorating.

09.15 Final estimates of a eurozone manufacturing survey show that the
decline in October was even more marked than previously reported.

The final Markit Eurozone Manufacturing Purchasing Managers Index (PMI)
for October fell to 47.1, from a preliminary reading of 47.3 and down from
48.5 in September.

The latest manufacturing PMI further emphasises the marked reversal of
fortunes for a sector that was the leading light of the economic recovery

09.05 As per the post below, the pressure on Italian bonds has eased a
little this morning. The yield, or the rate of interest investors demand to
hold the debt, has fallen back but still remains over the crucial 6pc level
at 6.01pc.

Italian newspaper Il Messagero and local newswire Ansa are reporting
that the Bank of Italy will start an emergency operation to swap government
bonds held by Italian banks in exchange for a pledge from institutions to
buy longer-dated debt.

If there are more buyers for Italian government debt, it will push the price
up and the yield, or borrowing cost, down.

The country's top finance officials, including Economy Minister Giulio
Tremonti, Bank of Italy governor Ignazio Visco and Treasury head Vittorio
Grilli are meeting at 2pm today in Rome.

Andrew Roberts from RBS said Italy's debt stress is "dangerously close
to a level that could cause pandemonium in financial markets".

The point of no return - judging from the sequence in Greece, Ireland and
Portugal - would most likely be if LCH Clearnet imposed higher margin
requirements.

This trigger is 450 points over a basket of AAA benchmark bonds. The spread
reached 388 on Tuesday. "We're two more days of violence from this
point, but we're not there yet," he said.

08.30 Given that a Greek referendum is now even more likely to go
ahead, it is a mite confusing that European shares are up strongly this
morning.

Certainly disaster in the form of a collapse of the Greek government has been
averted for now, but there's more to it.

According to traders speaking to Bloomberg News, it's because investors
are looking ahead to this afternoon's US interest rate decision and
announcement from the Federal Reserve, which could contain some indication
that the Fed is willing to do more to help the US economy.

Jonathan Sudaria, a trader at London Capital Group, told the news
agency:

European markets are seen edging up on speculative hopes of a dovish FOMC.
Hopes are for some sign of further easing in the wings to ensure that the US
economic recovery doesn’t falter.

08.25 Benedict Brogan, deputy editor of the Daily Telegraph, has
more details on today's meeting aead of the G20 summit in Cannes.

Nicolas Sarkozy and Angela Merkel are meeting with the Greek Prime Minister
George Papandreou in Cannes today, and all eyes are now on the Cote D'Azur
for tomorrow's G20 heads of government meeting.

David Cameron flies out first thing tomorrow morning, and by then the
various meetings without coffee involving bad boy Greece and the mummy/daddy
act of Merkel and Sarkozy will have produced...something.

08.15 The other European markets are now open and are also climbing:

The FTSE 100 is up 0.7pc to 5,459 points, while the CAC is up
1.5pc in Paris and the DAX added 1.3pc in Germany.

The gains follow steep falls yesterday, when the CAC slid 5.4pc and the DAX
lost 5pc.

08.05 Even if you are a great lover of democracy, supportive of Greece
holding a referendum because it has a right to as a sovereign nation, it's
worth thinking about what is making the rest of Europe's leaders to anxious.

If Greece does reject the terms of the bail-out agreed last week, it will not
be eligible for more EU and IMF money and will quickly run out of cash,
defaulting on its debts and not being able to pay for any public services.

HSBC's Steven Major has told Radio 4 this morning that if Greece can't
pay its debts, it would be the biggest-ever default by a sovereign country.
That is a "systemic" problem, he said, because those losses would
hit banks and cause the whole financial system to slam shut, pulling every
other economy down with it.

So it's clear to see why Mrs Merkel and President Sarkozy have called an
emergency meeting today.

08.00 The London market is now open and has shown a slight rise, after
yesterday's steep fall:

07.30 More on the politics in Greece - George Papandreou has
scored a victory overnight getting cabinet support for the referendum, but
he still faces a vote of confidence by the Greek parliament on Friday.

If he can overcome that hurdle (and he says he is confident of doing so) then
he needs a majority of 151 out of 300 Greek MPs to agree to the referendum.

He only has a slim majority of 152 at present, and members of his own PASOK
party were yesterday calling for snap elections. So the fate of the
referendum is in the hands of Greece's parliament.

The referendum could be held as soon as December if it does go through, the
Greek interior minister reportedly said.

A clear mandate and a clear message in and outside Greece on our European
course and participation in the euro. No one will be able to doubt Greece's
course within the euro.

Later today, he faces Chancellor Angela Merkel of Germany and French
president Nicolas Sarkozy who have summoned him to talks in Cannes,
ahead of the G20 summit which starts in the Riviera town tomorrow.

07.15 Yesteday's
market sell-off continued in Asia, as fears intensified that Greece
might reject an austerity plan and default on its massive debts.

Japan's Nikkei tumbled 2.2pc to 8,640.42, with sentiment further hit by
data showing that US manufacturing grew more slowly in October, hampered by
weak demand for exports. Australia's S&P/ASX 200 dropped 1.1pc.

However shares on Hong Kong's Hang Seng climbed 0.5pc and markets in
mainland China rallied, after signs that inflation is cooling, meaning the
Chinese government could loosen monetary policy.

There has been a wave of selling across markets this week, since Greek Prime
Minister George Papandreou announced on Monday night that the country
would hold a referendum on the eurozone bail-out.

The Dow Jones slid 2.5pc to close at 11,657.96 last night, while the S&P
500 lost 2.8pc.

07.05 Good morning and welcome back to our live coverage of the
continuing global debt crisis. Log on throughout the day for the latest news
and views.

Read all our latest news on the financial
crisis, or take an in-depth look at events over the past month.